Latvia looks set to become the 18th EU member state to join the eurozone, giving much needed confidence to the troubled single-currency at a time when the future of the monetary union is being threatened by the bloc’s economic fragility.
The Baltic country announced on March 4 that it had formally applied to join the euro by January 2014. This move comes after Latvia successfully met key financial conditions, including low levels of inflation and fiscal debt.
After he signed the application, Latvia’s Finance Minister Andris Vilks informed reporters that, “This is a day that will enter Latvia’s history.” Latvia’s domestic currency has been pegged to the euro since 2004.
However, despite the center-right government’s enthusiasm for the euro, recent polls in Latvia suggest that about two-thirds of the country’s 2.2m population is opposed to joining the single currency.
Latvia’s Prime Minister Valdis Dombrovskis admitted in an interview with the Financial Times last week that the political uncertainty in Italy was hardly the ideal backdrop for Latvia’s euro entry, but he said that it still made economic, political and geopolitical sense for Latvia to join.
“It will serve as a positive sign of the financial and political stability of Latvia. It was clear from when we gained independence that we belong to Europe, not to the grey zone in between Europe and Russia,” he said.
Latvia’s entry to the eurozone would make it the fourth former communist Eastern European state to join the single currency after Slovakia, Slovenia and Estonia. Lithuania is expected to apply in the not too distant future with a real goal of obtaining membership in 2015.
The Czech Republic and Poland are also scheduled to apply in the next few years, although they are taking their time as they fear that the eurozone’s troubles could have a stronger contagion effect if they joined the troubled currency.
All new EU member states are required to join the euro once they have met key financial requisites. Ollie Rehn, the EU’s economic chief, said his office would produce a report on Latvia’s prospects by the end of May or June, but he declined to say whether he believed the country was ready to join. “Let’s not jump to conclusions,” Rehn said. “Let’s first draft the report.”
Read more: Bye-bye lats, hello €uro
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